Marketing 12e - Pride and Ferrell


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Marketing 12e - Pride and Ferrell

  1. 1. 17 Retailing and Direct Marketing
  2. 2. Objectives <ul><li>To understand the purpose and function of retailers in the marketing channel </li></ul><ul><li>To identify the major types of retailers </li></ul><ul><li>To understand direct marketing and two other forms of nonstore retailing </li></ul><ul><li>To examine major types of franchising and the benefits and weaknesses of franchising </li></ul><ul><li>To explore strategic issues in retailing </li></ul>
  3. 3. Chapter Outline <ul><li>The Nature of Retailing </li></ul><ul><li>Major Types of Retail Stores </li></ul><ul><li>Direct Marketing </li></ul><ul><li>Other Types of Nonstore Retailing </li></ul><ul><li>Franchising </li></ul><ul><li>Strategic Issues in Retailing </li></ul>
  4. 4. The Nature of Retailing <ul><li>Retailing </li></ul><ul><ul><li>Transactions in which ultimate consumers are the buyers </li></ul></ul><ul><li>Retailers </li></ul><ul><ul><li>Organizations that purchase products for the purpose of reselling them to ultimate consumers </li></ul></ul><ul><ul><ul><li>Retailers add value—shopping convenience, services, and purchasing assistance to customers </li></ul></ul></ul><ul><ul><ul><li>Retailers create utility—time, place, possession, and form </li></ul></ul></ul><ul><ul><li>Success in retailing comes from having a strong customer focus coupled with desired levels of service, product quality, and innovation. </li></ul></ul>
  5. 6. Major Types of Retail Stores <ul><li>General-Merchandise Retailers </li></ul><ul><ul><li>A retail establishment that offers a variety of product lines </li></ul></ul><ul><ul><li>Department stores </li></ul></ul><ul><ul><ul><li>Large retail organizations characterized by wide product mixes and organized into separate departments to facilitate marketing efforts and internal management </li></ul></ul></ul><ul><ul><li>Discount stores </li></ul></ul><ul><ul><ul><li>Self-service, general merchandise stores offering brand name and private brand products at low prices </li></ul></ul></ul>
  6. 7. Major Types of Retail Stores (cont’d) <ul><li>General-Merchandise Retailers (cont’d) </li></ul><ul><ul><li>Supermarkets </li></ul></ul><ul><ul><ul><li>Large, self-service stores that carry a complete line of food products, along with some nonfood products </li></ul></ul></ul><ul><ul><li>Superstores </li></ul></ul><ul><ul><ul><li>Giant retail outlets that carry food and nonfood products found in supermarkets, as well as most routinely purchased consumer products </li></ul></ul></ul>
  7. 8. Major Types of Retail Stores (cont’d) <ul><li>General-Merchandise Retailers (cont’d) </li></ul><ul><ul><li>Hypermarkets </li></ul></ul><ul><ul><ul><li>Stores that combine supermarket and discount shopping in one location </li></ul></ul></ul><ul><ul><li>Warehouse clubs </li></ul></ul><ul><ul><ul><li>Large-scale, members-only establishments that combine features of cash-and-carry wholesaling with discount retailing </li></ul></ul></ul>
  8. 9. Major Types of Retail Stores (cont’d) <ul><li>General-Merchandise Retailers (cont’d) </li></ul><ul><ul><li>Warehouse showrooms </li></ul></ul><ul><ul><ul><li>Retail facilities in large, low-cost buildings with large on-premise inventories and minimal services </li></ul></ul></ul><ul><ul><li>Catalog showrooms </li></ul></ul><ul><ul><ul><li>A form of warehouse showroom where consumers can shop from a catalog and products are stored out of buyers’ reach </li></ul></ul></ul>
  9. 10. Major Types of Retail Stores (cont’d) <ul><li>Specialty Retailers </li></ul><ul><ul><li>Traditional specialty retailers </li></ul></ul><ul><ul><ul><li>Also called “limited-line” and “single-line” retailers </li></ul></ul></ul><ul><ul><ul><li>Carry a narrow product mix with deep product lines (e.g., pet supplies) </li></ul></ul></ul><ul><ul><ul><li>Have higher costs and higher margins </li></ul></ul></ul><ul><ul><ul><li>Provide more product selection (first-line brands), product expertise, and high levels of personal service </li></ul></ul></ul>
  10. 11. Major Types of Retail Stores (cont’d) <ul><li>Specialty Retailers (cont’d) </li></ul><ul><ul><li>Off-price retailers </li></ul></ul><ul><ul><ul><li>Buy manufacturers’ seconds, overruns, returns, and off-season merchandise for resale to consumers at deep discounts </li></ul></ul></ul><ul><ul><ul><li>Charge less than department stores for comparable merchandise and offer few customer services </li></ul></ul></ul><ul><ul><ul><li>Have established long-term relationships with suppliers for continuing supplies of reduced-price goods </li></ul></ul></ul><ul><ul><li>Category killers </li></ul></ul><ul><ul><ul><li>Concentrate on a major product category and compete on the basis of low prices and product availability </li></ul></ul></ul>
  11. 12. Direct Marketing <ul><li>Direct Marketing </li></ul><ul><ul><li>The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet </li></ul></ul><ul><ul><li>A type of nonstore retailing </li></ul></ul><ul><li>Nonstore Retailing </li></ul><ul><ul><li>The selling of products outside the confines of a retail facility </li></ul></ul>
  12. 13. Direct Marketing (cont’d) <ul><li>Catalog Marketing </li></ul><ul><ul><li>A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet </li></ul></ul><ul><ul><ul><li>Consumer advantages are efficiency and convenience </li></ul></ul></ul><ul><ul><ul><li>Marketer advantages are lower location, facility, selling, and operating costs. </li></ul></ul></ul><ul><ul><ul><li>Disadvantages are inflexibility and limited selection and local service availability. </li></ul></ul></ul>
  13. 14. Direct Marketing (cont’d) <ul><li>Direct-Response Marketing </li></ul><ul><ul><li>A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders </li></ul></ul><ul><li>Telemarketing </li></ul><ul><ul><li>The performance of marketing-related activities by telephone </li></ul></ul>
  14. 15. Direct Marketing (cont’d) <ul><li>Television Home Shopping </li></ul><ul><ul><li>A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card </li></ul></ul><ul><li>Online Retailing </li></ul><ul><ul><li>Retailing that makes products available to buyers through computer connections </li></ul></ul>
  15. 16. Other Types of Nonstore Retailing <ul><li>Direct Selling </li></ul><ul><ul><li>The marketing of products to ultimate consumers through face-to-face sales presentations at home or in the workplace </li></ul></ul><ul><ul><ul><li>Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products </li></ul></ul></ul><ul><ul><li>Benefits </li></ul></ul><ul><ul><ul><li>Personal attention to customer </li></ul></ul></ul><ul><ul><ul><li>Convenience of time and place of presentation </li></ul></ul></ul><ul><ul><li>Limitations </li></ul></ul><ul><ul><ul><li>High costs make it the most expensive form of selling </li></ul></ul></ul><ul><ul><ul><li>Negative consumer view of direct selling </li></ul></ul></ul>
  16. 17. Other Types of Nonstore Retailing (cont’d) <ul><li>Automatic Vending </li></ul><ul><ul><li>The use of machines to dispense products </li></ul></ul><ul><ul><li>Can include items such as candy, chewing gum, soft drinks, cigarettes, newspapers, and coffee </li></ul></ul><ul><ul><ul><li>Advantages: small amount of space needed and no sales personnel </li></ul></ul></ul><ul><ul><ul><li>Disadvantages: high costs of equipment and frequent servicing </li></ul></ul></ul>
  17. 18. Franchising <ul><li>Franchising </li></ul><ul><ul><li>An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration </li></ul></ul><ul><ul><ul><li>Franchiser furnishes equipment, buildings, management know-how, and marketing assistance. </li></ul></ul></ul><ul><ul><ul><li>Franchisee supplies labor and capital and operates the business by the provisions of the franchise agreement. </li></ul></ul></ul>
  18. 21. Major Types of Retail Franchises <ul><li>Manufacturer Authorization </li></ul><ul><ul><li>Product producer licenses retailers to sell its brand name product(s) </li></ul></ul><ul><li>Distributor Authorization </li></ul><ul><ul><li>Product producer licenses distributors to sell its brand name product to retailers </li></ul></ul><ul><li>Producer Authorization </li></ul><ul><ul><li>Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies </li></ul></ul>
  19. 22. Franchising (cont’d) <ul><li>Advantages </li></ul><ul><ul><li>Enables startup with limited capital </li></ul></ul><ul><ul><li>Provides developed and proven business to franchisee </li></ul></ul><ul><ul><li>Attracts customers with established brand name </li></ul></ul><ul><ul><li>Allows immediate market entry </li></ul></ul><ul><ul><li>Motivates franchisee to succeed </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Control over aspects of the business and its operations by franchiser </li></ul></ul><ul><ul><li>Expense of continuing franchise royalties and advertising fees </li></ul></ul><ul><ul><li>Lack of control of franchisees by franchisor </li></ul></ul>
  20. 23. Strategic Issues in Retailing <ul><li>Retail Store Location </li></ul><ul><ul><li>Factors affecting location </li></ul></ul><ul><ul><ul><li>Intended target market </li></ul></ul></ul><ul><ul><ul><li>Kinds of products </li></ul></ul></ul><ul><ul><ul><li>Suitability site for customer access </li></ul></ul></ul><ul><ul><ul><li>Characteristics of existing retail operations </li></ul></ul></ul><ul><li>Types of Locations </li></ul><ul><ul><li>Free-standing structures </li></ul></ul><ul><ul><li>Traditional business districts </li></ul></ul>
  21. 24. Strategic Issues in Retailing (cont’d) <ul><li>Traditional Shopping Centers </li></ul><ul><ul><li>Neighborhood shopping centers </li></ul></ul><ul><ul><ul><li>Usually consist of several small convenience and specialty stores. </li></ul></ul></ul><ul><ul><li>Community shopping centers </li></ul></ul><ul><ul><ul><li>Include one or more department stores (anchors), some specialty stores, and convenience stores. </li></ul></ul></ul><ul><ul><li>Regional shopping centers </li></ul></ul><ul><ul><ul><li>Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers. </li></ul></ul></ul>
  22. 25. Strategic Issues in Retailing (cont’d) <ul><li>Nontraditional Shopping Centers </li></ul><ul><ul><li>Factory outlet malls </li></ul></ul><ul><ul><ul><li>Feature discount and factory outlet stores carrying traditional brand name products </li></ul></ul></ul><ul><ul><li>Miniwarehouse mall </li></ul></ul><ul><ul><ul><li>Loosely planned; lease space to retailers running retail stores out of warehouse bays </li></ul></ul></ul><ul><ul><li>Nonanchored malls </li></ul></ul><ul><ul><ul><li>Do not have traditional department store anchors; combine off-price and category killer stores in a “power center” format </li></ul></ul></ul>
  23. 26. Strategic Issues in Retailing (cont’d) <ul><li>Retail Positioning </li></ul><ul><ul><li>Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment </li></ul></ul><ul><li>Store Image </li></ul><ul><ul><li>Atmospherics </li></ul></ul><ul><ul><ul><li>The physical elements in a store’s design that appeal to consumers’ emotions and encourage buying </li></ul></ul></ul><ul><ul><ul><li>Interior layout, colors, furnishings, and lighting </li></ul></ul></ul><ul><ul><ul><li>Exterior storefront and entrance design, display windows, and traffic congestion </li></ul></ul></ul>
  24. 27. Strategic Issues in Retailing (cont’d) <ul><li>Scrambled Merchandising </li></ul><ul><ul><li>The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume </li></ul></ul><ul><ul><li>Intent of scrambled merchandising </li></ul></ul><ul><ul><ul><li>Convert stores into one-stop shopping centers </li></ul></ul></ul><ul><ul><ul><li>Generate more customer traffic </li></ul></ul></ul><ul><ul><ul><li>Realize higher profit margins </li></ul></ul></ul><ul><ul><ul><li>Increase impulse purchases </li></ul></ul></ul>
  25. 28. Strategic Issues in Retailing (cont’d) <ul><li>The Wheel of Retailing </li></ul><ul><ul><li>A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants. </li></ul></ul>Maybry’s at the Mall
  26. 29. The Wheel of Retailing FIGURE 17.1 Source: Adapted from Robert F. Hartley, Retailing: Challenge and Opportunity, 3rd ed ., p. 42. Copyright © 1984 by Houghton Mifflin Company. Used by permission.
  27. 30. After reviewing this chapter you should: <ul><li>Understand the purpose and function of retailers in the marketing channel. </li></ul><ul><li>Be able to identify the major types of retailers. </li></ul><ul><li>Recognize the various forms of nonstore retailing. </li></ul><ul><li>Have examined the major types of franchising and the strengths and weaknesses of franchising. </li></ul><ul><li>Have explored strategic issues in retailing. </li></ul>